Within days after launching Transgasm.org to “change the way surgeries are funded in the FTM and MTF communities forever,” Jody Rose and Buck Angel shut down the website amid criticisms that its scheme was untenable and illegal. The website now states: “We are disappointed that there are people who are spreading false rumors and slandering our names all over the internet. […] Because of this, we have chosen to remove ourselves from a project that is dear to our hearts.”

Rose and Angel repeatedly assert that their intentions were “good and genuine.” As I’ve pointed out in my previous posts, that their intentions may be “good and genuine”–as opposed to sinister and malicious–is precisely the problem.

In the now-deleted “Transgasm FAQ,” founders discussed how Transgasm was inspired by “law of attractions”:

The both of us have been corresponding for years and share a common interest: The law of attraction and thought science. We’ve always shared stories about how we’ve manifested what we wanted throughout the years, using thought science and the law of attraction.

One day we were talking about this again and realized that we could help empower the entire transsexual community (worldwide), its supporters, and anyone else who identifies the way they choose to identify, by sharing our success with thought science and the law of attraction. We worked hard to create a simple and easy to understand formula that went through many revisions.

The result?

An organization centered around knowing what you want, visualizing what you want, thinking positively, having gratitude, and seeing what you want come true, all with the spirit of reciprocity (a very important law of The Universe).

Popularized by Napoleon Hill and other authors of self-improvement books for upward-mobile businessmen, “law of attraction” is a magical belief that our thought can transform material reality. In particular, the law teaches that we can make positive material changes in our lives by simply having positive thoughts and attitudes, as positivity attracts positivity, and negativity attracts negativity.

In the “self-help” film “The Secret,” which is based on this theory, author Lisa Nichols explained:

Every time you look inside your mail expecting to see a bill, guess what? It will be there. You’re expecting debt, so debt must show up… Every day you confirm your thoughts. Debt is there because of the Law of Attraction. Do yourself a favor: Expect a check!

In other words, we receive bills because we of our thoughts, not because we have debt. By merely thinking positively, we can receive checks in the mail instead, according to the “law of attraction.”

This may sound absurd, but Rose and Angel actually believe in this. For example, they posted the following on their facebook page:

The poster (it’s not clear if it is Rose or Angel) was walking on sidewalk in Portland, thinking how he needed to buy a new hard drive that cost $159 for his computer. Suddenly, because he was being positive, he made $160 in cash to manifest in front of him with his thoughts alone. He happily picks it up, and buys a hard drive. (I’m not sure where the difference of $1 came from.)

Most of us in this situation would not think that we “manifested” the cash with our thoughts. We would assume that the cash fell out of someone’s pocket or wallet, which must have made them sad. Some of us might report the finding to a nearby business or to the police, hoping that whoever lost the money will come and claim it. Some of us might pocket the money. Regardless, most of us do not think that we “manifested” the cash with our own thoughts and therefore we deserve it.

Rose and Angel may have had “good and genuine” intentions to help trans people get what they want, but did not have a sound structure to actually do so. In fact, the structure they envisioned were completely untenable and likely illegal (though details of the scheme was unclear). But if you believe that you can “manifest” cash with mere thoughts, who needs a business plan? There is no reasoning with good-intentioned people with a harmful delusion.

And because Rose and Angel believe that positive thoughts make their project absolutely wonderful and beyond criticism, they perceive any criticism as expression of “hate” and “jealousy”–i.e. negativity. One might wonder why their project would attract so much negativity if “law of attraction” was true, but they purposefully ignore this fundamental contradiction: positivity must attract positivity, and therefore anyone who is negative toward them have to be worst kind of haters. They somehow do not seem to recognize their inconsistent and self-serving application of the principles of “law of attraction.”

I have described “law of attraction” as quintessentially American, because I view it as a variation of the more traditional national ideology of “American Dream.” “American Dream” suggests that anyone can become successful through hard, honest work, which functions to justify extreme income and class inequalities and blame the poor. “Law of attraction” does the same thing, except it doesn’t even require hard, honest work; you only need to think positively. Indeed, “law of attraction” is the “American Dream” for the lazy–and it is fundamentally a regressive, victim-blaming ideology.

Some critics of Transgasm have long criticized Angel for various reasons, but I am not one of them. The reason I become especially alarmed was because of Rose and Angel’s reliance on “law of attraction” in a financial scheme that appeared likely to harm many trans people. I was also alarmed because I know that people who promote pyramid schemes and other scams frequently use “law of attraction” to lure their victims and then blame them for their victimization when their scheme implodes. It has nothing to do with hating them, but I understand that they have difficulty recognizing my (and others’) concerns as long as they use “law of attraction” in a self-serving manner as a shield and weapon against anyone they perceive as “negative.” For now, I am glad that I helped to raise awareness of the danger of their scheme and its ideological foundation.

I wrote my previous post, “The trouble with Transgasm and its magical foundation,” based on how Transgasm claimed it functioned. But I suspect that the reality of its inner working is probably worse. This post, unlike the last one, is my speculation as to how Transgasm actually will operate. It is a speculation, but not a far-fetched “worse case scenario”: I believe that what I describe is not just possible, but probable.

In the last post, I summarized Transgasm’s claim:

According to Transgasm FAQ, Transgasm will teach trans people how to produce downloadable contents that can be sold via its website. Once the contents are sold, creators are paid 50% of the sale, plus 25% “paid forward” to pay for surgery for someone else on the “surgery list,” and the last 25% is withheld to keep the project itself going.

I explained how this scheme is already unworkable and illegal, but to be honest, I don’t believe that this is how it actually works.

My speculation is that vast majority of “downloadable contents” sold on Transgasm have little to no market value. My speculation is that Transgasm will sell them at an unreasonable and excessive markup.

Further, my speculation is that people will be able to move up on the “surgery list” on the basis of their sales, which will encourage them to buy their own contents multiple times to get closer to the coveted award. Transgasm earns $1 for every $1 “paid forward” for the surgery fund, which will be a lot if many people buy their own stuff in order to move up on the list.

Now, nobody know how much everyone is selling on Transgasm but its owners. That means that they could easily pick one of their close friends as the highest seller, or simply make up a fictitious “winner” and pocket the surgery money. This is not necessary what I speculate is going to happen, but it is something that is possible. Regardless, Transgasm owners will keep at least 25%, which is equal to the amount anyone might theoretically receive for the surgery.

Why do I speculate that this is how Transgasm works? For one thing, it is because that is how pyramid schemes often pass off themselves as “legitimate” multi-level marketing.

The main difference between so-called “legitimate” multi-level marketing and pyramid scheme is that legal ones like Amway sell actual products. Pyramid schemes often imitate this by “selling” otherwise worthless “products” among their participants to pretend that they are legitimate. But case histories are clear that they are nonetheless illegal pyramid schemes if the “products” are just pretense for transfer of cash, or de-facto entrance fee into the pyramid.

(Caution: “legitimate” multi-level marketing schemes are “legitimate” only in the sense that they are legal. In most “legitimate” multi-level marketing schemes, most people still lose money.)

Second reason I think Transgasm functions this way is the secrecy surrounding their “classes” in which they will teach people how to produce their products. If their goal is to help trans people access medical treatment they need, and they can actually help trans people learn to produce and sell marketable contents, why be so secretive? Why are they unable to publicize their superior knowledge so that everyone can benefit?

My speculation is that “contents” Transgasm will help people produce are only “marketable” within the scheme, and the primary “buyer” is the seller himself or herself.

If you are friends with Buck or Jody, please tell them that their scheme is both unworkable and illegal. It’s bad enough giving false hope to desperate trans people and then letting them down, but they can still turn back before they cause serious harm to their peers and possibly end up in jail themselves.

Buck Angel and Jody Rose’s new project Transgasm that exists to “change the way surgeries are funded in the FTM and MTF communities” has received both praises and criticisms over the last day or so. We all like the goal of providing new way for trans people to receive the medical care that they want, but many of us in the trans and ally communities are calling it a “scam.”

The trouble with the Transgasm scam is that people running it probably do not even think of it as a scam: they probably think that they are doing good for the community. I believe that their purported commitment to “law of attraction”–the quintessentially American magical belief that claims that “positive” thoughts attract positive outcomes–is what permits such self-serving distortion, self-indulgence, and victim-blaming that will follow when things fall apart.

According to Transgasm FAQ, Transgasm will teach trans people how to produce downloadable contents that can be sold via its website. Once the contents are sold, creators are paid 50% of the sale, plus 25% “paid forward” to pay for surgery for someone else on the “surgery list,” and the last 25% is withheld to keep the project itself going.

Some people are criticizing the 25% margin the project keeps for itself, calling it an exploitation of poor trans people’s creative work for the project founders to get rich off of. But that is not necessarily the criticism I have for Transgasm: after all, 25% margin is not any more exploitative than Apple, Amazon, and many other distributors of downloadable contents, who usually withhold 30% of the sale.

The problem really is the idea of “paying forword”: that is what makes Transgasm a pyramid scheme. In order to pay for just one trans person to receive surgery, dozens of trans people need to “pay forward” their 25%. These dozens of people will need dozens more each to benefit themselves. For the scheme to function, it requires an unlimited and exponentially growing number of trans people to join, as well as the unlimited and exponentially growing market for their products–and that will simply not happen. Like all pyramid schemes, only the first few would benefit and everyone else loses.

What if their classes are so successful that it only takes two or three trans people to pay for one person’s surgery? This would slow down the need for the pyramid’s expansion, but in time it will collapse just the same. Besides, if the classes can make trans people so successful at producing downloadable contents, why do they need to pool the resource with people they’ve never met, someone chosen by Transgasm owners? They could either save up on their own, or maybe pool resources with two or three of their close friends so that each of them could get their turn.

We all know that money does not just appear just because we want it, but “law of attraction” teaches precisely that money comes to us if we want it bad enough. It is, essentially, a magical thinking. Napoleon Hill popularized this delusion in the United States by appealing to white American business elites’ sense of entitlement and victim-blaming disdain for the poor. Buck Angel and Jody Rose say that they want to “share” their “success with thought science and the law of attraction” through Transgasm, but we need to reject the pyramid scheme and its magical foundation before it hurts many more trans people.

[Added December 8, 2013]

Here is an example of magical thinking typical of followers of “law of attraction”:

The poor person who lost $160 on the sidewalk was probably to blame for their own misfortune for having some “negative” thought.

In the previous post, I wrote about how penalizing cab drivers, hotel workers, and others for building relationship with people in the sex trade (instead of immediately reporting it to the police, as the law enforcement requests) isolates people in the sex trade (youth or adult, trafficked or not) and make them more vulnerable. But some people continue to insist that the right thing to do is to call the police, so here is further explanation.

Public policies often have unintended consequences. That is, when the government takes measures to encourage certain actions and discourage others, it does not necessarily lead to the desired result, and might even cause unanticipated harms. So the question we should ask is: what will happen if the government requires or pressures cab drivers, hotel workers, and other businesses to report suspected sex trafficking cases, including any suspected minor engaging in prostitution?

Cab drivers, hotel workers, and others witnessing potential sex trafficking cases have several options to choose from. They can 1) call the police, 2) pretend that they are not seeing anything, 3) refuse services to them, or 4) approach the potential victim and build relationship so that they can offer resources if they need and want them (including calling the police if that is what they want).

Businesses might call the police in the very rare cases when they are 100% certain that the person is being trafficked, or the victim is clearly underage (someone who appears like a pre-pubescent, for example). But when it is uncertain, which things usually are, businesses are reluctant to call the police on their customers.

When the cost of acting on a suspicion that might be wrong (such as calling the police under false impression) is high, businesses recognize that it is in their best interest to remain (or feign) uninformed about the situation (option 2), or simply distancing themselves from it (option 3), rather than risking angering innocent customers (option 1), or learning too much about the situation by becoming too involved with people who might be in the sex trade (option 4), making them complicit in the crime in the eyes of the law enforcement.

As a result, policies that are intended to promote option 1 (calling the police) actually lead businesses to choose options 2 and 3, and foreclose further the possibilities for more innovative solutions that meet people in the sex trade, build rapport with them, and assist them in ways they desire.

In my last post, I explained that I was mainly discussing the “lower end” of the commercial sex market. There are many reasons I focus on people who trade sex at the “lower end” of the market: they have least options when it comes to viable economic alternatives; they are most vulnerable to violence, exploitation, and arrest; “end demand” policies tend to employ strategies that impact them (and their clients) the most; and they are more numerous than sex workers at the opposite end (i.e. high-class courtesans and call-girls).

In limiting my discussion to this sub-population of people in the sex trade, I am making an assumption, which I think matches casual observation, that there are at least three distinct class- and economically-based segments to the sex trade. They are distinct in the sense people who trade sex rarely switch back and forth between different segments (though they may occasionally move between them), and tend to compete for different groups of clients (johns), who do not usually cross over either.

The “lower end” segment is characterized by low (or no, or even negative) downward elasticity of supply, as I explained in my previous post. This category is not necessarily restricted to those who appear worst off under objective measurements: they are not necessarily homeless, drug-addicted, mentally troubled, unable to find other work, etc. It simply means that they do not have economic alternatives they consider viable, which may be different for each person depending on her or his circumstances and priorities.

The supply and demand chart for this group would show steep, vertical, or even reversed supply curve, as discussed in my previous post.

The second segment is the market in which supply elasticity is relatively high. People who trade sex in this segment of the commercial sex market often have other sources of income (e.g. students who are financially supported by their parents) or have other economic opportunities, but engage in the sex trade for extra income, spare time, or other perks. Because they have other viable economic options and also because they have more to lose when things go wrong, they exit the market when the price for commercial sex drops below what they expect to be compensated for in exchange of risks (legal, physical, health, social/reputational) and uncomfortableness associated with the sex trade.

The supply and demand curves for this segment most closely matches what proponents of “end demand” policies might imagine, but their policy proposals won’t be effective even for this particular segment. It is because “end demand” policies focus on the prosecution, which tend to target the lower end of the market rather than the middle market where artificial reduction in demand might actually make a difference (people in this market segment prioritize safety and discreteness more than those in the lower end because they have more to lose, and are therefore harder for the law enforcement to identify). Further, even if they could successfully reduce supply within this segment, they are only reducing optional, freely entered, consensual commercial sexual transactions, and not sex trafficking or sexual exploitation of vulnerable populations.

Finally, there is a much smaller luxury market of commercial sex, which is made up of high-class call-girls (and boys) and their elite/wealthy clientele. This market is characterized by the exclusivity on both supply and demand sides, which make them unresponsive to minor fluctuations in the market forces–that is, elasticity is low for both supply and demand. It is difficult to chart this segment because clients might have (and are able to insist on) more specific preferences for a particular sex worker or sex workers, making each “product” (i.e. commercial sexual service) unique. But for the sake of comparison, the supply-demand chart might look like this:

I did not even attempt to draw “high demand” and “low demand” scenarios because “end demand” policies are unlikely to have any impact in this segment of the prostitution market. There are highly publicized cases of high-class prostitution rings being busted or famous politicians, business executives, or celebrities being caught in “sex scandals” involving high-class escorts, but they are exceptions: for the most part, sellers and buyers in this market are not affected by “end demand” campaigns such as the “National Day of Johns Arrests” which I mentioned in my previous post.

Some people believe that commercial sex might be a Veblen good. I can see that it might be a possibility at the highest end of the market, but I doubt that it explains anecdotes reported on Tits and Sass or in Superfreakonomics. If escorts can indeed get more business offering their service for $500 instead of $350, it probably has more to do with perception of signaling in a market that lacks clear information.

In my discussion, I focus on the first segment of the commercial sex market for the reasons I explained at the beginning of this post, but I thought it might help readers’ understanding to clarify what I am not discussing when I write about sex trade. I also believe that understanding downward supply-side elasticity is essential not just in distinguishing different segments of commercial sex market, but to craft effective policies to address problems associated with them–and avoid implementing counter-productive policies that are harmful to the very population they are intended to help, like many “end demand” initiatives.

“End demand” approach to addressing human trafficking continues to gain traction, as law enforcement agencies across the country hold the third “National Day of Johns Arrests.” The 10-day simultaneous campaign against alleged buyers of sex is led by Cook County Sheriff Tom Dart, who claims that 66 johns have been arrested in Cook County alone.

Of course, Sheriff Dart’s claim is dubious, considering the fact that Chicago (which is in Cook County) Police Department routinely misclassifies trans women (frequently young trans women of color) who have been arrested for selling sex as “buyers”: as of this writing, the Chicago PD lists 36 “sex buyers” on its website dedicated to publicly humiliating alleged “sex buyers,” of whom 7 are clearly dressing as women (and a couple more appear gender-ambiguous).

I have in the past pointed out why “end demand” policies are harmful to people who work in the sex trade, and even provided a further explanation for the economics of “end demand” policies. But recently I had an online exchange with someone who goes by the name “uncorrelated” and seems to know a lot more about development economics than I do that helped me explore a possibility that I have hinted before but did not feel confident enough to articulate, because it appeared to go against basic economic theories which I have not been formally trained in anyway.

But after my conversations with “uncorrelated,” I am now prepared to make an unconventional and counter-intuitive claim: that “end demand” approach to prostitution, which seeks to reduce demand for commercial sex through public education, prosecution, public humiliation, and other means, may increase prostitution, rather than decrease it, under certain (realistic) conditions.

There are two important assumptions for this claim to be true. First, I assume that prostitution market has extremely low (or negative) downward price elasticity of supply, particularly at the lower end of the market (it makes sense to focus on the lower end, because prostitution market is highly segmented and people at the lower end are the ones most vulnerable to abuse and exploitation), because of lack of viable economic alternatives. Second, I assume that people who trade sex face a trade-off between generating income through sex trade and spending time and energy doing other activities (child-raising, family, community, school, leisure, etc.).

Elasticity is the degree to which changes in one economic variable (such as price) can affect another (such as demand). It is calculated as the ratio of percentage change of the variable that is affected to that of the variable that is manipulated: for example, price elasticity of demand (i.e. degree to which demand is affected by the changes in the price) is calculated as (the change in demand):(the change in price). If a 20% increase in price for a particular product resulted in a 20% decrease in demand, the price elasticity of that product is 1; on the other hand, if the same price increase only caused a 10% decrease in demand, the elasticity is 0.5.

Proponents of “end demand” policies implicitly presume normal (high) elasticity in prostitution market: that is, they believe that a reduction in demand would be met with a comparable reduction in supply, arbitrated by the lower price for sex. Below is a supply and demand chart that presumes normal elasticity.

Dh and Dl are demand curves (although I’ve made them linear lines for the sake of simplicity) corresponding to high and low demand scenarios. Where the demand curve intersects with the supply curve (represented by the line labeled S) determines the price for which sex is traded, and the quantity of sex traded. The chart indicates that reduction of demand (shifting from Dh to Dl) lowers both price and quantity of commercial sex.

But the supply side of prostitution market (people in the sex trade) are often there in the first place because they lack other viable or comparable economic options, and the reduction of the demand (and hence the price of sex) does not change that circumstance. If many sellers of sex do not have comparable alternatives to selling sex, they will be stuck trading sex for money even if the demand (and hence the price) goes down. That is, supply in prostitution market is downwardly inelastic.

The supply and demand chart below demonstrates this inelasticity of supply. Since price elasticity of supply is defined as the ratio of change in supply to the change of price, lower elasticity can be represented by a more steep supply curve.

This chart shows the same high and low demand curves, but the supply curve has been modified to reflect a lower price elasticity of supply. Compared to the first chart, this chart shows a more drastic drop in the trading price of sex, and much smaller decrease in the quantity of sex traded. That would mean that prostitution would become far less profitable but not much less prevalent.

A more extreme version of this scenario is the one in which (virtually) none of the people currently in the sex trade have viable alternatives (which, many anti-prostitution activists argue is the case). If none of them could find other sources of income, the supply elasticity would equal zero, which would look like this:

In the “zero elasticity” scenario, the level of demand (and hence the price) is irrelevant to the level of supply, because people are dependent on having income from it. Of course if the reduction in demand is more extreme–to the point they can’t find any buyers for sexual services at a price that is more profitable than, say, panhandling–there will be no supply whatsoever. But within reason, lower demand would only result in lower income and equal quantity of prostitution in the zero elasticity scenario.

Zero elasticity scenario may seem extreme and unrealistic, but it is not, especially when we are limiting our discussion to the lower end of the prostitution market. In fact, under certain circumstances elasticity can even be negative relative to what is generally expected: that is, a decrease in demand (and hence price) can lead to an increase (rather than decrease) in supply.

As counter-intuitive as it may be, this phenomenon is not unheard of in the field of development economics. For example, when the wage (price of labor) declines in a developing nation, families may try to compensate for the lower hourly wage by working longer hours, even sending children to work alongside adults rather than to school. Similarly, economists have observed that “fair trade” initiatives designed to increase payments to farmers in the developing nations for agricultural exports have sometimes resulted in these farmers working less hours–which may be a good thing if it makes them healthier or give their children opportunities to go to school. (See the chapter two of Development Microeconomics by Pranab Bardhan and Christopher Udry.)

This occurs because households face a different set of economic incentives compared to corporations. Corporations can hire more people or fire existing employees in response to the fluctuations in the market demand, but households cannot expand or contract at will. Increasing the amount of work necessarily reduces the amount of time and energy one has for other activities such as child-raising, family, community, education, and leisure. Because of this trade-off, households (and individuals) behave differently than do corporations.

Someone who works in the sex industry also faces this trade-off: the amount they work in the sex trade is negatively correlated to the amount of time and energy they have for other activities. When the market is booming, they might be able to make ends meet with minimal amount of work, which allows them to focus their time and energy for other things; however when the market bottoms out, they might be forced to work longer hours to make ends meet, sacrificing other responsibilities (e.g. children left by themselves or with untrustworthy associates) or their health (less sleep, less leisure time).

The chart below (provided by “uncorrelated”) compares “high budget/wage” and “low budget/wage” scenarios. Uh and Ul are indifference curves that show the optimal balance between the amount of labor and the level of income (i.e. household utility) under each scenario, as determined by the household. The straight lines represent the simple correlation between the amount of work one performs and the income from that work: higher wage obviously means one can earn more for the same amount of work, hence the more steep line.

The amount of work each household decides to perform is determined at the intersection of the indifference curve and the wage line. When the price of sex decreases and the wage line shifts to the lower one, the amount of labor performed by the household goes up, from Lh to Ll, rather than going down, as predicted in a simpler economic model. If my analysis is correct, prostitution market is more like labor market in these developing nations than simpler commodity markets for things like corn and wheat.

The next chart takes into account this analysis to show what actually happens when “end demand” policies are implemented with the aim to reduce demand for commercial sex.

When the demand decreases from Dh to Dl, lowering the price from Ph to Pl, the supply actually increases, from F(Lh) (supply level in the high wage scenario) to F(Ll). This is the exact opposite from what proponents of “end demand” policies have implicitly presumed would happen, and yet it is the logical, economically-sound conclusion if you add to the mix two simple, entirely reasonable assumptions about the lack of alternatives and the trade-off faced by people in the sex trade.

One might challenge the first assumption on the basis that many people in the sex trade actually do have other viable economic opportunities and will flee the sex industry if the price starts to decline. That may be true for some segments of the prostitution market, but unlikely for many who are in the lower end of the market, whom I am focusing here. I also do not expect any “end demand” proponents to make this argument, since they tend not to believe that prostitution can be freely chosen work for vast majority of people who are in the sex trade.

Proponents of “end demand” policies are more likely to challenge the second premise, arguing that people in the sex trade are frequently (physically for psychologically) forced to engage in prostitution, and are not in the position to make rational, utility-maximizing decisions for themselves. But if pimps are making decisions, they would certainly not accept a lower income simply because the market has bottomed out: they would likely use greater coercion to extract even more labor and thus income from the person they are controlling. So the end result would be the same: less demand leads to more supply.

“End demand” policies should be rejected because they harm the very people they are intended to help, and does not even succeed at reducing the supply of commercial sex in the long term (and may in fact increase it). Any reduction of demand will be temporary, because as long as there are no other viable economic opportunities, the price will decrease until it reaches a level that can attract enough demand to return. And on top of that, “end demand” policies push away clients (johns) who are relatively safer to work with and draw in those who are most dangerous, as I’ve argued before. The solution to economic desperation and vulnerabilities is to address that economic injustice, not to (make failed attempts to) mask its symptoms.

Note: I am seeking economists or economics students who are interested in collaborating on pushing this analysis further. For example, I want to figure out a systematic way to test the hypothesis through creative use of public information such as online sex ads and arrest records (indicating major sweeps) city by city. This may be a publication opportunity. Please email me at emi AT eminism DOT org if you are interested… and please share this post with people you know who might be interested.

In an article I posted a year ago, I explained why “end demand” approach to prostitution is harmful to women in the sex trade. But since “end demand” approach is just as popular as it was back then, I thought I’d provide a little bit more detail on the economic logic behind this argument. I’m not an economist, and besides I don’t have any actual data to back up my theory, so I’d appreciate feedback from people who know more about economics than I do.

“End demand” approach is often promoted as the application of simple economic principle of supply and demand, even though there is not a single credible economist who supports the idea. Siddharth Kara, a former Merrill Lynch investment banker turned anti-trafficking activist and author of poorly written Sex Trafficking: Inside the Business of Modern Slavery, is frequently referred to as the “economist” who is in favor of “end demand” policy, but his training is in business management, not economics.

In “supply and demand” model, we expect the market to automatically arbitrate constantly updating levels of supply and demand through price. An increase in supply in excess of demand results in price drops, which would stimulate more demand to match the supply. A decrease in supply raises the price, which in turn reduces the demand for whatever is being sold. Similarly, an increase or decrease in demand can raise or drop the price, which encourage or discourage supply.

It is unquestionably true that there would be no sex trafficking (or consensual sex trade for that matter) if there weren’t any market for commercial sex, because market transactions require both buyers and sellers (whether the sellers are people engaging in sex trade, or pimps and traffickers who are selling another person’s sexual labor). But the total elimination of the market altogether is unrealistic and probably involve some sort of totalitarian government control over people’s lives that most of us are not willing to accept. We must, therefore, think about the impact of “end demand” approach on the assumption that prostitution would remain as an underground economy, rather than that it would be completely eliminated.

Let us first think about the market for an ordinary commodity, like wheat. Imagine that the government passed some policy–whether it’s a restriction or new taxation or whatever–designed to artificially discourage the demand for wheat. The price of wheat goes down, which would simultaneously encourage 1) farmers and producers of wheat to switch to producing other crops that are more profitable, and 2) consumers to buy more wheat and wheat-based products instead of some other crops because it’s now cheaper than before. In a free, competitive market, this whole process occurs smoothly and transparently until the market adjusts to the new equilibrium at different levels of transaction amount and price point.

The question we have to consider is what that equilibrium would look like if we artificially reduced the demand for commercial sex through increased penalty and public education. The price would likely fall, as the sellers are forced to compete for the business of a smaller pool of buyers. But a modest drop in the price will not deter vast majority of the sellers, because many of them do not have other, comparable means for generating income. Even pimps and traffickers have little reason to change career (investment banker maybe?) until and unless the price of commercial sex goes down quite a bit, especially if pimping is as profitable as anti-trafficking groups claim.

In other words, a decrease in demand reduces the price, but that is not likely to lead to a comparable decline in supply: in economics, this is called inelasticity of supply. And because supply is inelastic, the market must compensate that by reducing the price further in order to reach the new equilibrium at the price point at which enough of the lost demand would return, either through more buyers entering the market or existing buyers purchasing more frequently.

From the buyers’ point of view, the cost of purchasing commercial sex is not just the money they pay to the seller (be it individuals who trade sex or their pimps/traffickers). “End demand” approach increases the overall cost of buying sex by increasing the legal, financial, and social risks of arrests and/or public humiliation as well as the transaction cost (cost of finding the seller and negotiating the transaction). Assuming that each buyer is willing to incur up to a fixed amount of cost in their pursuit of sexual exchange, they will be unwilling to hand over the same amount of cash as before if non-monetary costs (risks and transaction cost) are increased.

“End demand” policies are thus unlikely to reduce the actual amount of commercial sexual exchanges, but it shifts the distribution of cost buyers incur from the direct payment toward the non-monetary costs of risks and transaction costs. It means that while buyers are incurring an equivalent level of cost overall, sellers are receiving less of it for each transaction. To put it differently, sellers must engage in more transactions than before in order to maintain the same level of income, which pimps and traffickers are sure to insist–and even then, it becomes more and more difficult as other sellers also try to sustain their profitability, further driving down the price through competition.

In addition, “end demand” policies will have two other consequences for the sellers beyond the loss of income, both of which are harmful to the people who either consensually or unconsensually engage in the sex trade. First, they lower the seller’s bargaining power, which is the ability of each side of the transaction to “take the business elsewhere.” When the number of buyers decreases, it leaves sellers with a smaller number of potential buyers to negotiate with, and buyers with a larger number of potential sellers. In a market environment like this, buyers can easily find other potential sellers who might agree to a more beneficial (to the buyer) deal, they have a greater bargaining power that they can take advantage of. Sellers on the other hand cannot afford to lose the business by insisting on a favorable deal, and are pushed into arrangements that are less safe or comfortable, such as engaging in unprotected sex or performing acts they consider degrading.

Second, “end demand” policies change the profile of buyers in the market. Because not all potential buyers assign equal values to the increased risks of arrest and its various consequences or potential loss of reputation, “end demand” policies do not discourage all potential buyers equally: they discourage buyers who are generally more afraid of the risks (or risk-averse), while doing little to deter those who are impulsive and thrill-seeking (or risk-seeking). It seems reasonable to assume that members of the latter group are more interested in having unprotected sex and more likely to assault the person engaging in the sex trade than do those in the former group who are afraid of potential health, legal, and physical risks.

If I were an academic economist, I could not get away with hypothesizing the potential consequences of “end demand” approach, as I am doing now, without testing it against the actual data. But I am not an economist and I am concerned that proponents of “end demand” approach never even address what might happen when the demand actually begins to fall as a result of the policies they advocate: they seem to be operating under a vague sense that reducing demand means less prostitution and therefore less sex trafficking. I might not have an econometric proof of my model, but they do not even have a model that is worth testing.

It is this complete lack of concern and care for the well-being of the people they are ostensibly trying to protect that frustrates me. From where I stand, “end demand” is bad for all sex workers and others who are consensually engaging in the sex trade, and probably for most people who are forced and/or coerced into the trade as well, possibly even worse (as they are under greater pressure to maintain the same level of revenue after the market crashes). We must demand politicians, celebrities and anti-trafficking organizations that promote “end demand” approach to explain what they are hoping to accomplish and how these policies actually bring about desired changes.

This past week, someone from a national organization working to end violence against women contacted me and asked for my view about addressing the problem of sex trafficking on Craigslist. The inquiry is related to the Coalition Against Trafficking in Women’s planned protest at the headquarters of Craigslist, which is calling for Craigslist to prohibit classified ads for adult services. Below is an excerpt from my response.

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I think I already wrote my basic thoughts about this topic in the previous email, but here are some details:

1. Craigslist is not the problem. It appears to be doing whatever it can do to fight trafficking on its site, such as

– requiring confirmation by phone before an ad is posted–this ensures that whoever posted the ad can be tracked down if needed
– requiring payment by credit card, which provides further mechanism to track down
– manually reviewing every single ad that is posted for signs of trafficking or child sexual exploitation
– providing a directory of agencies to report suspected trafficking to
– cooperating with the law enforcement, providing them with tools and information needed for conducting investigations

2. There are many alternatives to Craigslist where sex workers and their pimps/managers/traffickers can advertise. Because Craigslist is a company that does business with the general public, it is in their best interest to work with non-profit organizations and law enforcement to combat trafficking in order to protect its public image. Operators of websites that specifically cater to the sex industry do not have the same incentive.

3. Adult service ads are a big part of Craigslist’s bottom line, as they are to alternative weeklies and other traditional media. But they do not necessarily depend on human trafficking. There is no evidence that human trafficking is a substantial problem at Craigslist, or any more of a problem than in any other media outlets (and Craigslist does more to address the problem of trafficking than any other classified services).

4. Many women use Craigslist to advertise their services because it is a relatively safe and cheap way to do so without a pimp, management, or large start-up cost (e.g. advertising in alternative newspapers). Cracking down on Craigslist harms many of these women by taking away opportunities for economic self-sufficiency and autonomy.

5. I did a LexisNexis research for reports about trafficking on Craigslist, and I found that vast majority of examples involved minors being recruited into prostitution. I’m trying to figure out how these pimps got caught, because that might give us an idea about how to identify sexual exploitation of minors, but there isn’t enough information in most newspaper articles.

That said, some incidences were uncovered because the ads hinted at trafficking (e.g. an ad offering “sex slave” for sale–which should never have passed Craigslist’s manual review and should have been reported immediately); while some others appear to have been intervened because the girl pictured in the ad looked too young.

I think that we should work with Craigslist to improve mechanisms to identify ads that share characteristics similar to other ads that have been identified as involving child sexual exploitation or trafficking. Craigslist is a technology company, and I’m sure that they can do better in this regard, utilising data mining technologies to distinguish between a woman posting an ad for herself or someone posting an ad on her behalf with her consent, versus someone forcing her to work. (Other industries such as banking and airlines use similar technologies to identify potentially fraudulent financial transactions or suspected terrorist activities.)

6. I also would like Craigslist to cooperate with projects such as Portland Bad Date Line, with which I am tangentially involved. Portland Bad Date Line collects reports about “bad dates,” that are johns who act violently or abusively, or announcing being HIV+ after insisting on and having unprotected sex, or pimps who chase the women in an effort to get the women to work for them, etc. and distribute this information to women (and others) working in the sex industry so that they can take further precautions.

Craigslist could post this sort of information for each region prominently in adult services section, which would provide information women can use to be safer while working, while at the same time warning potential “bad dates” that their information would be shared if they act out. Craigslist should also post information for women seeking help more prominently, although it is questionable whether or not women who are trafficked would actually see the site.

Let’s get Craigslist involved. I have other ideas that I want to bring up with Craigslist if we can get their ears.

7. I feel that what I’ve written above makes sense, and it is the rational and sensible approach to addressing the problem of trafficking. But I do not feel that many U.S.-based “anti-trafficking” groups are serious: they are simply using it as a cover to attack prostitution and the sex industry, and have little regard for how their actions might impact the people they are claiming to protect.

Case in point: the campaign to “end the demand” is absurd. Economics 101 suggests that if the demand for sexual services were to decrease, it would push the price of such services down. But supply is downwardly inelastic, since many women work in the sex industry because they do not have other viable economic opportunities, and the price has to go down quite a bit before another option–such as working as janitors and maids–become more viable compared to prostitution. That is, supply will not go down as much as demand does, and the end result is that more workers would be competing for fewer johns. It would not only mean less income for the women and their families, but it would also force women to make more risky choices–such as having unprotected sex.

Further, not all johns are equally predatory or unsafe to the women. Campaign to “end the demand” would mostly drive away johns who are risk-averse (i.e. those who do not like to take risks), while it would not affect thrill-seeking, risk-insensitive johns. But these thrill-seeking, risk-insensitive types are the ones that present more health and physical risks to those working in the sex industry. In other words, such campaign directly and indirectly harm the women working in the sex industry.

Here, the intentional conflation of trafficking and prostitution by the U.S. “anti-trafficking” movement constitutes a real problem: trafficking involves force, deception, or threats, which should be immediately intervened and victims rescued; advocating for the women working in the sex industry requires a much more nuanced and multi-faceted approach (such as creating viable economic opportunities and promoting economic and social justice). The campaigns to “end the demand” or to shut down Craigslist’s adult services section are most likely ineffective at actually addressing the issue of trafficking, and extremely harmful to the women who are working in the sex industry. And yet, by conflating the two, the U.S. “anti-trafficking” movement hijacks the discourse surrounding the sex industry, making it difficult for those of us working to advocate for women who are working in it.

Another example of irrationality: reports after reports claim that the average age of entry into prostitution is around age 13, usually citing Department of Justice or FBI as the source. If average is 13, that would suggest that there are equal number of 6-year olds and 20-year olds entering prostitution (assuming normal distribution), and that is obviously untrue. It is shocking to encounter someone who had become involved in prostitution at age 13 or younger, but this is definitely an exception, not the norm.

The “statistics” actually comes from a survey of minors who had an encounter with social services, and as such does not include any adults. If you only study minors who are in prostitution, of course the average age of entry is below 18–but it has nothing to do with the average age of entry in general. Consider this: if you only studied people who died as a minor, the average age of death would be something like 13–but that doesn’t mean that the average life expectancy is 13.

So is 13 the typical age of entry for those who became involved in prostitution as a minor? The answer is no. Because the research cuts off at age 18, someone who started at 13 has five times more chance to be included in the study compared to someone who barely started at 17, making the early starters five times more represented in the study. I don’t have access to the original data sets to figure out the actual average, but I suspect that it is closer to 17–and this is only the average for those who were involved as a minor.

The truth is that none of us know the actual average age of entry, but I feel that the U.S. “anti-trafficking” movement is cynically publicising the demonstrably false claim (“the average age of entry is 13”) in order to equate prostitution with trafficking of minors, distorting the public perception of the issue and harming many women who are impacted by the anti-prostitution measures they promote.

I would also add a historical observation: in the past, the U.S. “anti-trafficking” movement have come and gone along with the anti-immigration sentiment in the nation, as exemplified by the “white slavery” panic that coincided with the historical period between Chinese Exclusion Act and Alien and Sedition Acts. The “white slavery” panic did not improve lives of women (including many immigrant women) who were working in the sex industry, but instead functioned as a springboard for repressive policies that target marginalized communities. I fear that the current “anti-trafficking” fervour, coinciding perfectly with the heightened anti-immigration sentiment, is moving along the similar trajectory, and I hope that we can redirect the movement so that it can actually offer safety and freedom for victims without causing harms on others.